TODAY’S SPECIALTY FOOD

CONSUMER2016

Age groups noted throughout this research are defined

as follows:

iGeneration: 21 and under

Millennials: 22-39

Generation X: 40-51

Baby Boomers: 52-70

Swing Generation: +71

TODAY’S SPECIALTY FOOD CONSUMER

THE CORE SPECIALTY FOOD

CONSUMER: KEY DEMOGRAPHICS

GENERATION KEY

PACIFIC: 71%

INCOME$150K+ 85%

$100K–$149.9K 74%

$75K–$99.9K 67%

GEOGRAPHIC REGIONSNEW

ENGLAND: 61%

MIDATLANTIC

62%MOUNTAIN:

66%

MIDWEST: 52%

SOUTH:57%

GENDER

SPECIALTY FOODS ARE GROWING in both awareness and purchases, with nearly 60 percent of consumers saying they have bought a special-ty food or beverage in the past six months, according to this year’s “Today’s Specialty Food Consumer” report, compiled by the Specialty Food Association and Mintel. That number is up considerably from 47 percent in 2015. More consumers said this year that they are aware of the term specialty food itself and more reported understanding what the term means, two factors that are likely driving the increase in purchases. Though specialty foods are sold in many different kinds of retail channels, nearly half of specialty food consum-

ers say they’d like to see greater availability of these products in the stores they frequent, a desire which bodes well for the industry. Younger consumers remain the core specialty food customer. Those between the ages of 25 and 44 are the most likely purchasers of specialty food, followed closely by even younger custom-

ers ages 18 to 24. The millennial generation comprises the bulk of this group, in

addition to the emerging Generation Z or iGeneration, those born between 1995 and 2007 and who are just beginning to come of age. Gen Xers and baby boomers (ages 40 to 70)

are also engaged specialty food consumers and some of the differences in their purchasing habits and attitudes are examined on the following pages.

This research is based on an online questionnaire conducted by Mintel to explore consumption of and attitudes and behaviors toward specialty foods. Mintel and the Specialty Food Association were responsible for the survey design, data analysis, and reporting.

Fieldwork was conducted in July among a sample of 2,155 adults aged 18+ with internet access. Mintel selects survey respondents to be proportionally balanced to the U.S. adult population based on key demographics of gender, age, household income, and region.

ABOUT THE RESEARCH

WOMEN 58%

MEN62%

AGES

25–44

Illustrations: Peter and Maria Hoey

C2 TODAY’S SPECIALTY FOOD CONSUMER 2016

HERE ARE SOME DISCOVERIES about the purchasing behaviors, habits, and attitudes of today’s specialty food consumers that can help retailers and producers better posi-tion and grow their businesses.

SEVEN INSIGHTS FROM THIS YEAR’S REPORT

Parental influence. The core millennial consumers are starting families, positioning parents to be a new key demographic. Though not tabulated in this year’s report, respondents indicate that being a parent is a driver for increased specialty food consumption. Close to half (48 percent) of food dollars spent by parents is on specialty food. They buy across specialty food categories, but particularly in child-friendly ones like baking mixes, candy, pasta, and salty snacks. Parents are also big online shoppers, and about half say they are using or looking for an online grocery delivery service.

Prioritizing health. In the past two years, specialty food consumers have been more likely to cite dietary or health reasons as drivers to try specialty foods. This shift indicates how well the industry has incorporated better-for-you products with decadent foods and beverages. The market for nutritionally superi-or food, healthier takes on familiar foods, and functionally enhanced products will grow, even in non-traditional catego-ries like chocolate.

The powerful male shopper. Last year was the first time men surpassed women as the more likely to buy specialty foods, and the gap widened in 2016. Male influence in food decisions is up: men now account for 43 percent of primary shoppers and 46 percent report helping with meal preparation. Men have emerged as a significant consumer group to reach.

Conversion opportunities. According to this year’s report, 40 percent of consumers don’t purchase special-ty foods though, of these, 54 percent say they know what specialty products are. This translates into 22

percent of consumers who may be good targets to try to convert. Even consumers who are designated as “light” buyers, still buy specialty foods, especially treats like cookies, frozen desserts, and chocolate. Retailers could draw them in by merchandising indulgences, which often act as gateway products to further purchases.

Online takes off. This year’s respondents were more likely than ever to say they’ve made specialty food

purchases online. Millennials are the most likely to shop for specialty foods

online: 75 percent of respondents report doing so, followed closely

by Gen Xers. The convenience and savings of e-commerce both draw in consumers earning $25K to $50K, much less affluent than the typical specialty food consumer. As online shop-ping becomes the norm, it

opens an avenue to reach new consumer groups.

Shifting shopping channels. Beyond burgeoning online sales,

other non-traditional stores are becom-ing go-tos for specialty foods. This move-ment is largely driven by millennials, who are not loyal to a particular retailer and will shop in the widest array of stores. Specialty food sales in club stores, convenience stores, mass merchandisers, department stores, home stores, and gift stores are all growing as a result, as these stores begin to carry larger sets of specialty products.

Education craving. Even consumers who do the heavi-est specialty food purchasing would benefit from more guidance. Fewer than half say it is easy to identify specialty foods in the stores where they shop. Educa-tion, shelf signage, and staff knowledge could be an opportunity to garner even more sales from the biggest shoppers.

TODAY’S SPECIALTY FOOD CONSUMER 2016 C3

Merchandising: This group buys specialty foods to share with others. They like to entertain and plan parties for family and friends and they look for products to help them impress guests.Product Development: Millennials are the most adventurous with their diets: 80 percent report trying an alternative diet like high protein or low sugar.Positioning: To millennials, a company’s values matter just as much as the products they make. But the position companies espouse must be genuine; this group is suspi-cious of marketing ploys.Marketing: Restaurants and retailers need to have a social- media presence across platforms to connect with millenni-als. They are the most likely generation to use social media to talk/learn about food and places where they can eat or shop.Service: Millennials report that they would like retail staffto educate them about specialty foods. They are alsothe most likely consumer group to ask about recipes or preparation techniques.

GENERATION XNearly two-thirds of Gen Xers report buying specialty foods. These consumers use specialty foods daily, in equal amounts for meals and treats. They do seek out convenience during meal

preparation and will turn to kits or packaged sauces. Gen Xers, who are bet- ween the ages of 40 and 51, are becoming more health-

focused as they age. They are the most likely consumer group to look for quality ingredients on packaging and they are the most likely to shop for fresh foods at farmers markets.

WHO BUYS SPECIALTY

FOODS?

ATTITUDES AND HABITS: KEY OPPORTUNITIES

How Millennials Use Specialty Foods: Everyday meals or snacking; treats; gifts; to serve guests; for special occasions; to share at the office.

Most Likely to Shop at: Natural food stores; mass merchants; club stores; specialty food stores; online; convenience stores; department stores; and other outlets.

Purchase Drivers: Impulse; convenience; social or environmental concerns; to entertain or impress.

Millennials make up the bulk of the core special-ty food consumer group. They purchase special-

ty foods in the largest number of categories. These shoppers buy a lot of snacks and treats but, based on their high incidence of

purchasing items like meat, poultry, and seafood, and seasonings and spices, they are doing some at-home cooking too. Respondents reported that they use specialty foods both for everyday meals and indulgences. They also use specialty foods for the largest array of reasons, to enjoy personally or to share with others. Millennials shop for specialty foods through an assortment of retailers. These products are a part of their lives and this convenience-oriented group expects to find these foods wherever they are shopping.

MILLENNIALS

WHO BUYS SPECIALTY

FOODS?

C4 TODAY’S SPECIALTY FOOD CONSUMER 2016

How Boomers Use Specialty Foods: Everyday meals; treats

Most Likely to Shop at: Supermarkets

Purchase Drivers: Excitement and health

Purchase Drivers: Health; recommen-dations from others

How Gen Xers Use Specialty Foods: Everyday meals and snacking; to treat themselves; special occasions

Most Likely to Shop at:Farmers markets

BABY BOOMERSBoomers are an experiential and experimental group. They use specialty foods the most of all groups for cooking at home. They do a lot of scratch cooking and enjoy trying new things. They consider themselves knowledgeable about

food, and excitement and a desire for new experiences drive their specialty food purchases. While excitement may

be front burner, health and social consciousness also plays into purchasing decisions with this group. Boomers, now between the ages of 52 and 70, are taking their health seriously and report eating more natural and healthy foods such as those with fewer artificial ingredients or preservatives. They are also the most likely consumer group to purchase products that claim to be fair trade, ethical, or sustainable.

WHO BUYS SPECIALTY

FOODS?

ATTITUDES AND HABITS: KEY OPPORTUNITIES

Merchandising: Boomers like to cook and don’t seem driven by shortcuts or convenience. Ingredients and recipes for scratch cooking go over well with this group.Product Development: Boomers report wantingto eat healthfully and steer clear of artificial ingredi-ents but they still want exciting and different tastes.

Positioning: Boomers like to shop where they agree with the company valuesor philosophy.Marketing: Product claims like locally sourced, non-GMO, gluten-free, fair trade, ethical, and sustain-able are purchase drivers with this group.Service: Boomers like to shop where employees are knowledgeable about the products.

Merchandising: Gen Xers are the most likely consumer group to make a purchase based on sampling a product in store.Product Development: Convenience matters to Gen Xers: They are the most likely to cook or prepare a meal from a quick option like a meal kit or pasta sauce.They also seek out specialty foods to use as ingredients to improve prepared or takeout foods.Positioning: As they enter their 40s and 50s, Gen Xersare health conscious and look for brands that provide

quality, clean ingredients. They are the group who most believes GMOs should never be used in foodand beverage products.Marketing: Gen Xers report frequently using appsto find or use store coupons or restaurant discounts.Service: Personal connections with retailers are import-ant to Gen Xers. They like to hear the storyor heritage behind the stores where they shop and they like to shop where they know the owners.

ATTITUDES AND HABITS: KEY OPPORTUNITIES

TODAY’S SPECIALTY FOOD CONSUMER 2016 C5

Cheese and cheese alternatives

Ice cream and frozen desserts

Chocolate

Coffee, coffee substitutes, and cocoa

Oils and vinegars

Cookies, brownies, cakes, and pies

Pasta

Pasta and pizza sauces

Beverages—non-alcoholic (e.g., juice, soft drinks, water)

Tea (packaged)

TOP 10 MOST-PURCHASED CATEGORIES

33%

32%

31%

29%

29%

28%

28%

26%

25%

25%

TOP GROWING CATEGORIES

Beverages—non-alcoholic (e.g., juice, soft drinks, water)

Candy (non-chocolate)

Cereal (hot, cold, granola, museli)

Meals (frozen, chilled)

Pasta

Pasta and pizza sauces

Appetizers and antipasti (pickles, peppers, olives)

Beverages—alcoholic

Condiments and dressings

20%

13%

19%

16%

24%

22%

15%

16%

16%

25%

17%

23%

20%

28%

26%

18%

19%

19%

2015 2016

2016

WHAT DO SPECIALTY FOOD CONSUMERS BUY?In 2015 there were six categories that had at least 25 percent of specialty food consumers saying they’d made purchases in the past six months. This year that number has increased to 10 categories, seven in food

and three in beverages. Perennial favorites cheese and chocolate remain in the top three categories, as does frozen desserts, driven by dairy as well as non-dairyalternative products.

Meat, poultry, and seafood

Salty snacks

Beverages: alcoholic

and nonalcoholic;

coffee; tea

CerealMeals, frozen

or chilled

Nuts, seeds, anddried fruit

Oils and vinegars

Pasta and

pizza sauces

Salsas and dips

Seasonings, spices,

and spice rubs

Ice cream and frozen desserts; chocolate and non-chocolate candy; cookies, brownies, cakes, and pies

MILLENNIALS AREFREQUENT PURCHASERS OF:

Appetizers and

antipasti

Condimentsand

dressings

Cooking sauces

and marinades

Snack bars and energy

bars

Spreads and

dessert sauces

GEN-XERS ARE FREQUENT PURCHASERS OF:

Condimentsand

dressings

Grains,beans, and

rice

Cheese and cheese

alternatives

Oils andvinegars

Pasta

Snack bars and energy

bars

BOOMERS ARE FREQUENT PURCHASERS OF:

Source: Mintel

Source: Mintel

Yogurt and kefir

C6 TODAY’S SPECIALTY FOOD CONSUMER 2016

Coffee, coffee substitutes, and cocoaTea (packaged)ChocolateOils and vinegarsPasta and pizza saucesCookies, brownies, cakes, and piesNuts, seeds, and dried fruit and vegetablesPastaSeasonings, spices, and spice rubsSnack bars and energy bars

WHERE DO SPECIALTY FOOD

CONSUMERS SHOP?

Apps and delivery services for groceries or meal ingredi-ents are going to be more important in the coming years. The core specialty food consumers are already using or seeking these solutions, and they will be the norm among even younger consumers as they reach adulthood.Apps: Usage is up overall to:• purchase groceries• find or use store coupons or manufacturer coupons • check for recipes• scan products in store to compare prices or learn about allergens or nutritional levelsDelivery services: More than one-third of respondents are actively looking for an online grocery delivery service. Millennials are the most likely to be seeking these services, followed by Gen Xers. Overall, 15 percent of respondents already use apps from food delivery services like Blue Apron. Online payments: Millennials are frequently using apps like Google Wallet to pay for food or meals at markets or restaurants.

Supermarkets, natural food stores, and mass merchants were the top three channels where consumers purchased specialty foods in 2016. But sales dipped slightly or stayed stable in all of those while rising in assorted untraditional channels. Club stores, online shopping, convenience stores, department stores, home stores, and gifts stores all saw an increasing number of shoppers buying specialty foods.

DIGITAL AND DELIVERY: KEY OPPORTUNITIES

SupermarketNatural food store (e.g., Whole Foods, Trader Joe’s)

Mass merchandiser (e.g., Walmart, Target)

Farmers marketClub store (e.g., Costco, Sam’s Club, BJ’s Wholesale)

Specialty food storeOnlineStand-alone bakery (not in a grocery store)

Convenience storeDepartment storeHome store (e.g., Bed, Bath & Beyond, Cost Plus)

Wine or liquor storeGift storeOther None of the above

CHANNELS WHERE SPECIALTY FOOD CONSUMERS SHOP

67%44%35%33%27%26% 12% 17% 11% 9% 8% 11% 4% 1% 0%

58%40%36% 31%29%25% 16% 16% 15% 12% 12% 12% 9% 2% 3%

2015 2016

2015 201653%10%9%

10%6%8%8%5%8%7%

59%11%11%

10%9%9%8%8%8%8%

SPECIALTY FOOD AND DRINK CATEGORIES PURCHASED ONLINE

TODAY’S SPECIALTY FOOD CONSUMER 2016 C7

MEAN WEEKLY SPENDING ON FOOD FOR SPECIALTY FOOD CONSUMERS

OVERALLCook/prepare at home: $113 From restaurants: $77

MILLENNIALSCook/prepare at home: $118 From restaurants: $95

GEN XERSCook/prepare at home: $104 From restaurants: $62

BABY BOOMERSCook/prepare at home: $109 From restaurants: $56

HOW MUCH DO SPECIALTY FOOD

CONSUMERS SPEND?Specialty food consumers spend considerably more on food they prepare at home or eat in restaurants compared to their non–specialty–food consumer counterparts. Non–specialty–food consumers spend a mean of $93 per week on food at home versus $113 for specialty food consumers, and $40 per week to eat in restaurants, nearly half of the $77 spent weekly by specialty food consumers.

With younger people representing the core shopper, it stands to reason that they may be earning less than the $100K+ annual salary key demographic of the specialty food consumer. Consumers earning consider-ably less are still making these foods and beverages part of their daily lives. (See box, right.) Specialty food consumers purchase in an average of 7.2 categories. That number hits eight categories among the most affluent consumers earning between $100K and $150K+ annually. However, consumers who earn less still shop in a significant number of catego-ries. Groups on both ends of the income spectrum report they’d like to see more specialty foods for sale at the stores where they shop.

THE LESS AFFLUENT SPECIALTY FOOD CONSUMER:

KEY OPPORTUNITIES

Certain categories are a draw to less affluent shoppers, who will spend on specialty foods for snacking or to enjoy as treats. Chocolate, cakes, salty snacks, and cheese are just some categories where these shoppers spend their most dollars. Other products like pasta or pizza sauces or cooking sauces and marinades do well as they offer conve-nience in meal preparation. Retailers can draw in these groups by featuring snacks, treats, and convenience items and cross merchandising them with related foods and beverages for further purchase potential.

Focus on Snacking, Indulgenceand Convenience

Attend our webinar Today’s Specialty Food Consumer

Tuesday, Oct. 4, 1-2 p.m. EDT

Written by Denise Purcell, editor of Specialty Food Magazine; research led by Ian Au, brand specialist for the Specialty Food Association.

THE LESS AFFLUENT SPECIALTY FOOD CONSUMER

• Uses specialty foods for everything from treats to everyday snacking. • Purchase drivers: New experiences; the desire to eat more healthfully; impulse; convenience; interesting packaging; and recommendations from friends. • Consumers earning under $25K - $74.9K annually: Buy in an average of 6.5 categories What they buy: Cheese; ice cream; chocolate; coffee; oils and vinegars; cookies, brownies, cakes, and pies; pasta and pizza sauces; pasta; tea; meat, poultry, and seafood.• Consumers earning $75K - $99.9K annually: Buy in an average of 7.9 categories What they buy: oils and vinegars; cookies, brownies, cakes, and pies; pasta; non-alcoholic beverages; meat, poultry, and seafood; salty snacks; cereal; salsas and dips; frozen or chilled meals; cooking sauces and marinades; grains, beans, and rice.

C8 TODAY’S SPECIALTY FOOD CONSUMER 2016